Delta Air still burning cash as COVID-19 recovery remains elusive

In this news, we discuss the Delta Air still burning cash as COVID-19 recovery remains elusive.

CHICAGO (Reuters) – Delta Air Lines does not expect to plug a daily cash loss until next spring due to the COVID-19 pandemic, which hit its business harder than expected in the third quarter, said Tuesday. Managing Director Ed Bastian.

With the timing and form of a recovery still uncertain, Delta and other airlines have focused on cutting costs, increasing liquidity and restoring customer confidence.

But quarantines, new outbreaks of COVID-19 in Europe and the United States, and uneven public health measures remain a deterrent, Bastian said.

The shares were down 3.2% in midday trading.

To boost demand and ease travel restrictions, Delta is betting on increasing COVID-19 testing and contact tracing and increasing data showing risk of COVID-19 transmission on planes is “remarkably low “Bastian said.

Revenue from Delta, which locks up mid-level seats in early January, fell 76% to $ 3.1 billion in the third quarter from a year earlier, with little improvement seen this year.

Business travel will pick up in 12-24 months, but not 100%.

Costs, however, will tend to come down, helping to improve daily cash consumption to around $ 10 million in December, from $ 18 million in September and $ 27 million in June.

Delta previously said its cash loss would stop before the end of the year.

“Delta has met a large portion of its cost targets; now it’s all about boosting demand and revenues, ”said Helane Becker, analyst at Cowen.

With no immediate need for new jets, the company delayed delivery of the Airbus and Bombardier jets and postponed more than $ 2 billion in payments initially due this year and $ 5 billion until 2022.

It also accelerated the withdrawal of nearly 30% of its fleet, or 400 aircraft, by 2025, resulting in a restructuring charge of $ 2.2 billion.

The overall flight capacity will decrease by 40% this year.

It took $ 3.1 billion after some 18,000 employees went through voluntary departure and early retirement programs aimed at thinning its workforce.

With fewer employees, Delta still has $ 1.3 billion in grants out of the roughly $ 5.5 billion it received from Congress in March to cover airline payroll costs for six months and protect employees. jobs.

“We’ve stretched those dollars,” Bastian said. The money can be used in the fourth quarter, on top of any additional help if lawmakers finally approve another $ 25 billion support package for U.S. airlines.

Industry push for more aid has broad bipartisan support, but is stuck amid a stalemate in Washington over broader economic relief from COVID-19.

Unlike its two main rivals, Delta has avoided leave for flight attendants and other frontline workers after cutting hours, but it could still lay off some 1,700 pilots on November 1 without a union deal or federal aid. extra, Bastian said.

Atlanta-based Delta ended the quarter with $ 21.6 billion in cash, after a $ 9 billion fundraiser in September guaranteed by its loyalty program. Adjusted net debt stands at $ 17 billion.

Delta, the first U.S. airline to release third-quarter results, plans to start repaying debt next year once it has positive cash flow, Bastian told investors.

The company fell to a net loss of $ 5.4 billion, or $ 8.47 per share, in the quarter from a profit of $ 1.5 billion a year ago. On an adjusted basis, the loss was $ 3.30 per share.

Reporting by Tracy Rucinski; Additional reporting by Sanjana Shivdas in Bangalore; Editing by Leslie Adler, Steve Orlofsky and David Gregorio

Original © Thomson Reuters

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